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Market Loves Bed Bath & Beyond CEO Hire, But Analysts Warn Turnaround Is A Tough Job

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Market Loves Bed Bath & Beyond CEO Hire, But Analysts Warn Turnaround Is A Tough Job

Bed Bath & Beyond Inc. (NASDAQ: BBBY) shares surged 25% Thursday after announcing it has hired Mark Tritton as its new CEO, stealing him from Target Corporation (NYSE: TGT).

The move also drew praise from Wall Street analysts who said Tritton is a good fit for the housewares chain as it tries to turn its fortunes around. Tritton, most recently vice president and chief merchandising officer at Target, was lauded for helping reverse a sales slump there.

The Analysts

Wedbush analyst Seth Basham reiterated an Outperform rating and $16 price target on the stock.

Bank of America analyst Curtis Nagle kept a Buy rating and $20 price target on the stock.

Morgan Stanley’s Simeon Gutman remained Equal-Weight with a $12 price target.

Credit Suisse analyst Seth Sigman remains Neutral, with a $14 price target.

KeyBanc Capital Markets analyst Bradley Thomas kept a Sector Weight rating on the stock.

See Also: Bed Bath & Beyond Analysts React To Q2 Print, Same-Store Sales Miss

The Theses

Nagle said the hire is “extremely positive news” for the struggling retailer, though bears might push back on Tritton’s lack of CEO experience.

But Nagle says Tritton has shone in areas where Bed Bath & Beyond most needs help, including private label and sourcing initiatives, pricing, and the growth of omni-channel, or online, retailing.

“Mr. Tritton’s decision to leave a much larger retailer that is executing well and has a higher multiple says a lot about the turnaround potential at BBBY,” Nagle wrote in a note.

Not Easy

Analysts said that turnaround isn’t going to be easy.

Pricing and store traffic are problems, and the company needs improvements in online experience and speed of delivery, said Sigman.

“The road ahead seems like an uphill one, and getting steeper each quarter,” Sigman wrote. “While we fully appreciate the support from cost reductions and potential asset sales that can help slow the bleeding, we are still not sure how BBBY will reinvent itself.”

That caution was echoed by Gutman, who said Tritton’s mandate will be to stabilize sales, reset cost structure, optimize the asset base and refine the organizational structure.

Analysts expect the company could step away from its 2019 guidance, and some see possible store closures, among other changes.

Given recent woes, Tritton’s arrival is “something for investors to be more optimistic about,” Gutman wrote. “On the negative side, all these changes reduce BBBY's earnings visibility in the near-term and execution risk remains high.”

Other Reactions

Basham: “While turning around declining retailers is a very difficult task, particularly amidst unfavorable secular trends and soft industry sales growth, we see a good chance of stabilization—if not growth—in earnings over the next two years as sweeping changes take hold.”

Thomas, who noted Tritton helped Target achieve eight straight quarters of comparable sales increases: “We view Mr. Tritton’s experience as a great fit for the needs of BBBY.”

Price Action

Bed Bath & Beyond shares jumped 23.7% on Thursday, trading around $12.30 at time of publication.

Photo by Raysonho/Wikimedia.

Latest Ratings for BBBY

DateFirmActionFromTo
Oct 2019UpgradesSector WeightOverweight
Oct 2019UpgradesMarket PerformOutperform
Oct 2019MaintainsNeutral

View More Analyst Ratings for BBBY
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